Intergenerational Transfers and the Demonstration Effect
Cox, Donald, and Oded Stark. “Intergenerational Transfers and the Demonstration Effect”. Boston College Working Papers in Economics 329, 1996.
How can parents secure old-age support in the form of care, attention or financial transfers from their children? We explore the enforcement of implicit intergenerational agreements from a fresh angle by studying the possibility that the child's conduct is conditioned by the parents' example. Parents can take advantage of this learning potential by making transfers to their own parents when children are present to observe such transfers. Parents who desire old-age support have an incentive to behave appropriately. The idea that the parents' behavior is aimed at inculcating desirable behavior in their children generates testable hypotheses about transfers that we investigate using household survey microdata. The demonstration-effect approach also has implications for such diverse phenomena as population aging and the labor market participation of women.